SERVICES

Analysis of the Andersen Consulting 1999 Business Results

AC Limps Out of 1999

Former Growth Champion Follows IBM, Cap Gemini, into Single-Digit Growth Territory

W. AUSTRALIA, Mar. 17 – What a difference a year can make in the IT services business.  Especially if it is a century milestone, like the Y2K.  One year ago, Cap Gemini Group (CGG) and Andersen Consulting (AC) were slugging it out for the gold medal in the Annex Research 1999 “IT Services Hexathlon”.  The hotly contested bout ended up in a tie, with Andersen collecting the gold in a “photo finish.” 

This year, however, the only thing in which AC outslugged CGG was for the cellar position among the world’s top five IT services vendors.  AC limped out of 1999 with an 8% revenue growth, as compared to CGG’s wimping out with a 2% increase (see “CGG’s Wimpy 1999 Growth”).

The two former IT services champions, therefore, will have finished 1999 as No. 4 and No. 5 in the field of top five competitors that AC (especially) had dominated in the previous five years.  Between 1994 and 1998, for example, the AC revenues had grown between 20% and 26% every year, before dropping into a single digit range in 1999.  It is the company’s worst performance since 1993, when the company reported only a 6% revenue increase. 

Both AC and CGG followed IBM’s precipitous drop in growth that the Big Blue had initially heralded last October, and later confirmed it with its 4Q99 results released in January (see “A Slam Dunk of Bunk”).  In IBM’s case, the global IT services leader’s revenue rise slumped to only 2% in the fourth quarter, and was down to only 11% for the full year 1999 – only half of its five-year compound annual growth of 22%.  All three companies cited a slowdown in customer buying due to Y2K as the main reason.

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Our report then goes on to conclude:  

In other words, AC is doing what IBM could have and should have done long ago had it had a visionary, rather than a would-be emperor, at its helm (see our Aug. 1996 article, “Louis XIX of Armonk”).  Instead of squandering billions of dollars on stock buybacks, as IBM has been doing, AC is investing in grassroots growth.  Most of those investments won’t pan out.  But the 20% that do, will probably more than pay for the 80% of the failures.  That’s the nature of entrepreneurial success. 

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Here are some of the sub-headings from the rest of this Annex Bulletin:

The Dot.Com Mentality

A New Vision

AC Practicing What IBM, DEC Had Preached

Analysis of Industry/Geographic Segments

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Bob Djurdjevic